We document pervasive evidence of reversals in firm-level working capital accruals over adjacent fiscal years. We demonstrate that the majority of these accrual reversals relate to ‘good' accruals that: (i) correctly anticipate future benefits; (ii) lead to higher earnings persistence; and (iii)...

We examine 2,190 SEC Accounting and Auditing Enforcement Releases (AAERs) issued between 1982 and 2005. We obtain a comprehensive sample of firms that are alleged to have misstated their financial statements. We examine the characteristics of misstating firms along five dimensions: accrual...

Research on accounting accruals is pervasive. Yet the measurement and modeling of accruals has developed in an ad hoc manner, resulting in a fragmented and incomplete body of research. Our goal is to rectify this situation by (i) providing a comprehensive definition of accruals, (ii) formulating...

We show that accruals consist of at least two distinct underlying processes, one with positive serial correlation and the other with negative serial correlation. We also find that the accrual reversals characterizing the negatively serially correlated process are predominantly good accruals that...